Civil service looking to trim down

A wholesale restructuring of the Cayman Islands civil service, in some ways similar to an exercise that was recommended in a 2010 consultant report to government, is now under way.

It has been given the somewhat clandestine-sounding name of “Project 1”, but government officials have actually made no secret of the review.

The management of the Cayman Islands civil service noted Saturday that the “rationalisation exercise” will involve all of its ministries, portfolios, departments, statutory authorities and government companies.

The review is to be led by civil service chief officers Eric Bush, Dax Basdeo and Alan Jones, along with an unnamed “expert” from the United Kingdom.

“There are 13 ministries and portfolios, over 70 departments and sections, 25 statutory authorities and government companies and numerous boards, committees and commissions,” the meeting minutes from a 21 January civil service chief officers meeting read. “Some functions and responsibilities of these entities may be duplicated, obsolete, misplaced or require structural adjustments to better serve the needs of the country.”

A report was expected to be complete this April detailing the civil service’s new organisational structure, including the addition of two new government ministries created under the 2009 Constitution Order.

The rationalisation review was set to assist Governor Duncan Taylor in allocating responsibilities for the new government following the May general election.

The Cayman Islands civil service has been working for quite some time on downsizing. Deputy Governor Franz Manderson has previously announced plans to cut civil service staff by some 360 positions within the next five years. There is also a “pay freeze” in effect for all members of the civil service that was announced last August.

The service and its related authorities and companies still employ in the neighbourhood of 6,000 people – well more than 10 per cent of the entire workforce in the Cayman Islands. Both downsizing and privatisation of certain aspects within the government service were recommended in a consultant report released in early 2010, dubbed “the Miller/Shaw report”.

The review, completed by former United States budget management director Jim Miller and former British Member of Parliament David Shaw, concluded that the only real savings within the Cayman Islands government budget would come in the area of personnel costs.

“It is absolutely necessary that urgent action be taken to bring under control the costs of civil servants, including those in statutory authorities and state-owned enterprise,” the report read.

The Cayman Islands civil service and government elected members have since rejected calls made in the report for across-the-board, 8 to 10 per cent salary reductions. However, the government has already taken steps to reduce the number of civil servants within core government.

The Miller/Shaw report set the goal for that figure at just under 3,100 civil service employees, not counting those in statutory authorities and government-owned companies.

A recommendation that the retirement age be raised to 65 has already been proposed in draft legislation for the National Pensions Law, but that would only affect private sector employees.

The commission recommended that one of four criteria be used in determining which enterprises to concentrate on for privatisation, including if it was already under review for privatisation. Other criteria suggested were if there was a viable commercial activity with a revenue source independent of government subsidies; an activity for which there was already a considerable global track record of successful privatisation; and a commercial function that is a drain on government revenues.

In August, North Side Member of the Legislative Assembly Ezzard Miller warned that adding three new seats in the Cayman Islands Legislative Assembly, including two ministerial positions, would be too costly.

“We can’t implement three additional members of parliament at this time,” Mr. Miller said during a budget debate panel hosted by the nonprofit group Generation Now.

Mr. Miller estimated that it would cost slightly less than $500,000 in salaries and benefits for the three new assembly members. However, he opined that it would cost somewhere in the neighbourhood of $10 million for two new ministries created under the constitution.

Civil service managers have given no such estimates for the costs of the new ministries.

The new MLAs will be chosen during the 22 May general election. Their inclusion in the governing body will bring the number of George Town district representatives to six and the number of Bodden Town representatives to four.

1 COMMENT

Ever since the Miller-Shaw Report three years ago, everyone knew the government administration had to be trimmed. It has been available to everyone, including policymakers, on the Government’s website (http://www.gov.ky/pls/portal/url/item/81DAFF7BCF7DC2DBE0406F0A6F1F6262). The first recommendation read ‘Do not impose direct taxation.’ Then-prime minister McKeeva Bush had announced he would implement many of the recommendations. And what has he done? Exactly the opposite: He has suggested the first-ever income tax on Cayman, doing the Islands’ reputation great harm, while at the same time putting government money into loss-making entities like Cayman Airways and the Turtle Farm that are better left to the private sector. Richard W. Rahn, in the October 2012 issue of the Cayman Financial Review, has asked whether the Islands were ‘committing economic suicide’ (http://www.compasscayman.com/cfr/2012/10/12/Is-Cayman-committing-economic-suicide-/). The sad answer is yes if the public administration is not cut back substantially. A jurisdiction of Cayman’s size with such a narrow revenue base cannot sustain a public sector of the present size. While the current government expenditure is already on a worryingly high level, the exploding future pension liabilities for current civil servants when they retire are truly scaring. Not sure if everyone is aware of this coming fiscal hurricane. Someone will have to pay for them eventually. That means everyone! Who wants to see his home’s value diminshed due to a property tax? Which business owner wants to cope with all the red tape just to calculate VAT? What employee is keen on sharing his meager salary with the government? So a thorough rationalization of the public sector is of utmost importance and urgently required. But it will be difficult. Who will have to go? I do not remember whose idea it was (not mine, at any rate) not to sack the laziest and least efficient civil servants, but doing the opposite: Kick out the well-qualified executives. For two reasons: Firstly, they have the highest salaries, so removing them will bring about the biggest savings. Secondly, they are the ones who will most easily find a new job in the private sector. How about that?